California Lt. Governor: This Aggression Against Our Expropriation Of Private Property Will Not Stand, Man

It is not news that California, despite what the money laundering practices aided and abetted by the NAR at the ultra-luxury segment of housing may indicate, is and has been for the past 5 years neck deep in a massive housing glut (with millions of houses held off the books in shadow inventory), which together with a complete economic collapse of this once vibrant economy, which happened to be the world's 7th largest, led various cities to resort to the socialist practice of expropriation, or, as it is known in the US, eminent domain, whereby a citizen's rights in property - in this case their home - are forcefully expropriated with due monetary compensation, naturally set by the expropriator. It is also no secret, that Wall Street, which has the most to lose by handing over property titles on mortgaged houses in exchange for money that is well below the nominal value of the mortgage, is not happy about this draconian quasi-communist measure, and has apparently told California to cease and desist. It is, apparently news that California has had enough of these bourgeois capitalist pawns, and has decided to, appropriately enough, channel El Duderino, and to tell Wall Street that this aggression against forced socialist expropriation, by broke deadbeats, will not stand... man.

California Lieutenant Governor Gavin Newsom says he wants the U.S. Department of Justice to investigate "threats" against local communities considering using eminent domain to seize and restructure poorly performing mortgages to benefit cash-strapped homeowners.

Newsom sent a letter on Monday to U.S. Attorney General Eric Holder asking federal prosecutors to investigate any attempts by Wall Street investors and government agencies to "boycott" California communities that are considering such moves.

"I am most disturbed by threats leveled by the mortgage industry and some in the federal government who have coercively urged local governments to reject consideration" of eminent domain," he wrote in a letter, a copy of which was provided to Reuters.

Newsom, a Democrat who was previously mayor of San Francisco, warned the influential Securities Industry and Financial Markets Association in July to "cease making threats to the local officials of San Bernardino County" over the proposed plan to seize underwater mortgages from private investors.

Some towns in San Bernardino County, which is located east of Los Angeles, have set up a joint authority that is looking into the idea of using eminent domain to forcibly purchase distressed mortgages. Rather than evict homeowners through foreclosure, the public-private entity would offer residents new mortgages with reduced debts.

Newsom said in the letter on Monday that while he is not endorsing the use of eminent domain at this time, he wants communities in California to be able to "explore every option" for solving their mortgage burdens "without fear of illegal reprisal by the mortgage industry or federal government agencies."

Today California Lieutenant Governor Gavin Newsom calls on the Securities Industry and Financial Markets Association (SIFMA) to cease making threats to the local officials of San Bernardino County.

SIFMA has attacked the idea of local governments using existing law to help families remain in their homes and keep their communities viable.

"Communities have been ravaged by the housing crisis and the financial sector has had long enough to fix the problem they helped create," Newsom said. "We cannot let another day go by while families are forced from their homes. We must think big and help our local governments develop solutions - because the industry and federal government have not."

"This may be an aggressive idea, but communities such as San Bernardino, Chicago and others have no choice in these desperate times," Newsom continued. "We cannot allow Wall Street, who exploited the housing market for financial gain, to kill an idea before it is given a fair hearing."

"The true injustice of the last few years is that as banks were bailed out and government claimed it has done all it can, the homeowner, the backbone of our communities, has received nothing but eviction notices," said Newsom. "We need to help the people that government bailout programs have left behind - ordinary folks that have worked hard to keep their homes even as values plummeted."

"The economic power that would be unleashed if consumers are untethered from the anchor of these underwater mortgages would result in a return of consumer confidence, economic grow and job creation."

San Bernardino County Chief Executive Officer Greg Devereaux, joined by the cities of Ontario and Fontana, have set up a JointPowers Authority (JPA) to explore options to keep people in their homes before they are in foreclosure.

"I applaud the leaders in San Bernardino for thinking and acting big to protect their communities," said Newsom. "Greg Devereaux' communities are some of the hardest hit in the country and his leadership on this issue should be rewarded with support not the threats of a Washington, DC interest groups that are protecting Wall Street."

"The Washington, DC special interest groups needs to back off," said Newsom. "We owe it to homeowners everywhere to see if the solutions being discussed in San Bernardino will work."

Because it's "only fair." In other news, obviously socialists are not golfers. They may be, however, housebroken.

These are just legal fictions and ex post facto justifications of theft. Theft is either universally wrong, or it is universally right. If it was universally right, it would be voluntary (mutually agreed upon), and no longer called theft.

Furthermore, your comment presupposes that The State is the only means of enforcing private property rights. It amounts to the linear thinking, not dissimilar from the idea that freeing slavesn would have prevented cotton from being picked? It doesn't matter. Slavery is wrong. If all men were created equal, why are a few men allowed to have all the guns, and why is it legitimate for them to commit acts that would land the rest of us in jail?

Proposition 13, the Jarvis_Gann initiative to limit rises in property taxes, was passed by the people of California in 1978. Jerry "Moonbeam" Brown was the Governor then and the people, that were seeing 10% year over year property tax increases, rose up en masse and said "Enough!' The State of California fought this all the way to the SCOTUS, where they lost in 1992....for14 freakin'years they fought to retain their right to squeeze the people to whatever degree they wished. Now...guess who's Governor today and guess what he's trying to overturn?

We are in thrall to the communists, the california dream has become the california nightmare.

It's not uncommon but with time, market forces tend to move these extremes back to the median. Taxing $2 million houses as if they were still $230k will not last. The Parteee may be over but I can't blame them for fighting. I tried fighting property taxes and lost double....stuck with higher taxes and a Fat Legal bill to boot !

Many newer neighborhoods (the ones built the last 10 years with zero down) with city hall expansions, new fire dept, police expansion, etc....are raising taxes rapidly to pay for all the "new stuff."

My taxes shot up from $7,200 pa to over $12,500 pa in five years despite fighting the good fight.

I couldn't agree more! Trying to run a business in this state is becoming ridiculous. And since surveys were showing that the people were going to vote against the high-speed rail, he did a run-around on that legislation as well, sneaking it through the legislature and already issuing over $2 billion in bonds. It this goes like a typical Caltrans project, it will end up costing us a half trillion or more by the time it is completed. For those of you not living in California, you will also be paying for this California disaster since they expect most of the money to come from the federal Grants and loans. They say that the average ticket is supposed to be $81. Hah! The cost will be more like $8,000 per seat!

Gavin is a moron and brain donor if he thinks this will help the poor people. What bank in their right mind will want to underwrite mortgages in California without a hefty downpayment and 800 FICO score? Mortgages will be even harder to get, blocking even more people from the dream of home ownership, except his wealthy elitist friends, of course!

july 2007 would have imploded the banks, but that was the first time the fed lowered rates, in a suprise announcement at 8:30 on opex. news had leaked out because the last hour of thursday the /es futes shot straight up green.

it would have tanked then, and we would be more than 5 years into the recovery. all of us that were savers would have been justly rewarded, and all the overreaching, debt-ridden bastards would have got what happens to people when they fuck a stranger in the ass

I have family and a couple of friends living in Commiefornia - they moved there quite some time ago, before it was taken-over by the assorted breakfast cereal that is the CA electorate (as-in nothing but fruits, flakes and nuts). For them, I feel bad.

But anyone who, from this day forward until "The Great Reset" happens, buys a piece of real property in Commiefornia richly deserves the epic boning they are almost certain to get.

But for the previously mentioned family and friends I'd have a hard time not wishing for the entire sorry state to get flushed into the Pacific.

Actually, it is a beautiful place to live and there are more of us normal people here than you realize. However, we are far outnumbered by the bleached-brain morons, expecially here in Silicon Valley. Instead of having California fall into the ocean, I would rather that normal folks from all over the country (those that still have brains capable of logic) move here, take over the State and evict the socialists, Hollywood, and other assorted idiots and turn this place back into the "Golden" state of opportunity it was when my parents immigrated. Then we can fix the state and secede!

I love it when at 7 a.m. I am in the central valley and then just a couple of hours later, I am at Big Sur with a view that most people only see in magazines. People from all over the world live here, many professional people including physicians from other states and countries move here.

Ever been to Santa Barbara, Carmel, San Francisco's Union Station during the Xmas season? Skiing in the many mountain resorts.

Fruit and vegetable stands on every corner priced right. A heating bill in the winter that is under 50 bucks, bike paths on beautifully maintained city streets with colorful flowers everywhere, no litter in comparison to the northeast where I grew up.

The lack of humidity makes the heat tolerable unlike Florida and Texas (let's talk about Texas...or W. Virgina..Nevada..(casinos and the smell of desperation).if you want to take about people who are not the best neighbors.

Gay people I suppose are the fruits...whatever...I don't really care about what people do behind closed doors. The nuts? they like living outdoors in a schizophrenic kinda way. What is hurting the state small towns is gang activity and overcrowded system with illegal immigrants who are in place to increase profits while keeping the price down.

It's changing quickly here but it has more to do with the politicians and banks than the nuts and fruits.

Unfortunately it is the morons and ill informed who keep voting in the wrong politicians. The folks that can tell you more about TV show plots and who is dating who in Hollywood than what is really going on in the world. Most of them make their voting decisions from stupid soundbites rather than from reading the propositions, or decide on a candidate based on campaign promises rather than researching their actual track record or anything having to do with the truth. And many of them want to believe in the "wouldn't it be nice" fantasies rather than making informed decisions based on reality. Frankly, so many are pseudo socialists.

Bizarro world indeed. This amounts to government fighting with itself over the theft of private property when the original note was separated from the borrower. Last time I checked, 200+ years of contract law says that the second the chain of title is broken, the borrower becomes the owner, bitchez.

But the prols aren't stupid. They don't refinance. Refis are at all time lows. Sure, interest rate policies or rather lack thereof has to do with it. But how many homeOWNERS are just flipping the middle finger to Wall Street by keeping what is rightfully THEIRS.

So what if Wall Street imploded. It wouldn't hurt anyone. But massive foreclosures on families who are simply struggling to pay off ODIOUS debts is hurting.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.

Yeah sure, REMIC and REIT investments (bets) ARE guaranteed. Blow the bubble up and lock it in baby.

First, the chain of title is never broken in these separation issues... we know who the legal owner is at all times (the debtor)... no one else has an ownership interest until they successfully foreclose. Now, title may be clouded due to outstanding liens, but the chain of title isn't broken... term of art.

Second, even if the creditors separate the notes from the mortgages, the mortgages are STILL GOOD AS TO THE MORTGAGOR and, further, the creditors can pursue unsecured breach of contract claims against the debtor. The only thing that screwing up the mortgage process gets you (except in extreme circumstances, typically only in the case of a penalty by the court) is a loss of your priority amongst other creditors. It's axiomatic in contract law that you have to abide by it if you sign it... this goes for both parties. However, if you do not follow the controlling jurisdiction's recording acts, then you do not get to partake in its protections of priority, among other things. You get to go to the back of the bus with the other unsecured creditors and fight over the meat remaining on the bones, if any, after the priority buzzards have had their fills.

I encourage you to look at the case law in your state... I promise you that you will find cases where even if a mortgage is inherently defective (cannot be recorded, improperly notarized, etc.), then it's still good as against you if you signed it... this is a pretty just outcome in that the debtor still has to keep his promise, but the creditor no longer gets priority in the security. With multiple claims on every household, it's going to hurt when the dust settles.

No. The only terms of the contract broken are when the debtor fails to pay... Typically, assignment of the note/mortgage is expressly allowed (given the banks draft the documents and intended to assign them from the start). So, the botched assignment isn't really a breach of contract... it is this contract that the creditor uses to assert a claim against your estate.

The issue with bankruptcy seems to be a misnomer given secured and unsecured debts can be discharged... you may even be entitled to keep the security depending on your jurisdiction's laws... (e.g. homestead laws). Typically, they limit the amount of acreage and/or monetary value of the home that you can keep.

Where a creditor has been determined to have screwed up the assignment(s) and/or initial drafting/execution of the documents, then it will likely get pushed back to status as a general creditor... which will then get a % of your estate based upon its weight of your total debt. However, other creditors, e.g. secured, may have a higher priority and, thus, get first bite at the apple.

In short, you're not going to get a free house, but some of your creditors may get cock stamped for being stupid... sounds fair to me.

Thanks for clearing this up Machoman. I thought the whole MERS and messing up the assignments (blank or incomplete assignment) through the REMICs basically severed the secured interest in the property.

Thanks Macho. Good explanantion. Glad to see the laws have bot changed. I was involved with one of these years ago and screwed up paperwork also results in more legals costs and delays but the final results are as you state.

Part of what brought about the advent of the Mortgage Backed Security (MBS) is what is called the Real Estate Mortgage Investment Conduit (REMIC). REMICs were invented in the late 1980’s by investment banks as a means to funnel mortgages to investors and avoid taxation by the IRS. The laws that indenture these REMIC products are NY Securities Law and they are very strict. Upon closer examination it is revealed that at the heart of these MBS innovations are many, perhaps millions, of legally and permanently defective mortgages.

If the trust is expressed in the instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the trust, except as authorized by this article and by any other provision of law, is void.

Servicers will often move under state statute to foreclose, identifying themselves as "owner" or "holder". In many instances they are actually nothing more than a conduit to an "investor" whose identity they claim they can't reveal per some type of agreement they made amongst themselves. Without revealing that investor's identity it is not possible to establish an agency relationship. They also frequently assert that that borrowers cannot assert any claims against any of these third parties when in fact, given the very first opportunity to break the law...they did. They broke the terms of their own MBS contract. After the Trust is closed nothing can be "back-filled" into the Trust without triggering massive negative tax consequences per IRS 860 A - G so they are tax cheats too.

The reason for this is many times the trusts have triggered a credit event and all the loans that reside in them are paid by a bailed out phoney unregulated default insurance peddler. Any loans in the trust that are still performing go right in the servicers pocket as a windfall.

The big bankers realize this is a problem. This report from the Illinois Bankers Association gives an indication of how screwed they will be if they (gasp) have to follow the law. They go on to cite the "moral hazard" that following the law would create. It's spooky.

What a racket. Lenders send out their own agent to make an outcome based "appraisal". There is no risk because the "value" is locked for good. The bailed out fake insurance companies pay out with taxpayer money. Presto!

The concern of this petition has to do with our "independent judgment" in performing real estate appraisals. We, the undersigned, represent a large number of licensed and certified real estate appraisers in the United States, who seek your assistance in solving a problem facing us on a daily basis. Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value.

Thanks for the info. That take on REMICs was the same conclusion I came up with. REMICs needed all the details filled in BEFORE notes went through them. MERS made the note a number and then it was plowed through to be filled in later. Many were never even filled in, and still others (will have to look for the links) were assigned to multiple MBSs, so the banks basically were fractionally reserving MBSs.

Yep. Total clusterfuck... and, more importantly, a toal clusterfuck of epic proportions... pratically speaking, it's the largest reason why there have been no reforms made in the housing industry... the issues of title, lienholders, right to foreclose/standing, etc. are all issues commonly dealt with over the last few centuries+... in other words, the system can work it through... the dark pools, derivatives, and shadow banking... not so much.

I think it would be fair to paint the present system as feudalism... maybe we'll get to swords, shields, and whiping our asses with our bare hands, but I'm thinking you weren't meaning it that literally...

I think the simplest explanation is risk aversion... I don't really see some united and sinister purpose, I simply see general governmental functions (spend it all this year or else get less next year) combined with risk aversion in the uncertainty of the outcome of an economic/monetary collapse. J6P is doing likewise... not much choice really. Black rifle disease has a hold on many houses...

What part of "unlimited state power" do you not understand? The State at all levels had been given unlimited power, especially with Robert's decision on Obamacare. Individual states write their own constitutions and now the Fed can help, too.

If that letter to Holder didn't have $100,000 with it he won't even read it. You get what you pay for in Washington and not a penny more. Now if Holder would see an opportunity or someone should show him an opportunity on how to address this issue he may be on board.

Meet Neil Codell an Illinois educator with a $26 million state pension.

Just to drive the point further -- if Obama gets his way on his proposed state bailout, you will be paying a portion of Mr. Codell's pension. 'Codell, Neil C.' is 4th from the top of the list. His estimated career pension is $26,661,604. That's almost $27 million for a single administrator within just one local Illinois school system (Niles, to be exact).

Newsom sent a letter on Monday to U.S. Attorney General Eric Holder asking federal prosecutors to investigate any attempts by Wall Street investors and government agencies to "boycott" California communities that are considering such moves

OT: but this .10% "plunge" in SPY is making us nervous. It is as if nobody at the Fed cares about nudging SPY up into the green today, or am I just impatient? We should be testing S&P 500 1450 by now. Can WSJ give us a few Hilsenrumors before day's end, please?

Donald Scott, a 61-year-old wealthy Malibu rancher, was murdered in 1992 by a joint task force (comprised of members of the Los Angeles County Sheriff's Department, L.A.P.D., Park Service, D.E.A., Forest Service, California National Guard, and California Bureau of Narcotics ) conducting an early-morning raid on the pretense that Scott was growing pot on his property. Responding to his wife's screams, a clueless Scott grabbed a gun and confronted the intruders. Two bullets were pumped into him. No pot was found. Ventura County District Attorney Michael D. Bradbury released a report criticizing the task force for using false information to secure a search warrant. Bradbury characterized the effort as an attempt to use forfeiture laws to slice up Scott's considerable assets between the participating agencies. "Clearly one of the primary purposes was a land grab by the Sheriff's Department," Bradbury wrote. They had obtained an appraisal of the property weeks before the raid. Los Angeles County and the feds tentatively agreed to pay $5 million to Scott's survivors.

That goes on in every county in the country on a daily basis. Civil forfeiture laws are tyranny magnified. Your property, be it cash, cars, house, etc can be seized and no charges even filed against you.

The Scott case was egregious, but merely par for the course when it comes to LEO raising revenue.

come on guys, cant you just get along....both sides need to remember that we are a fascist corporatocracy now!!!!! this isnt good for either sides business........now lets just sit down and hammer out a new bond arrangement with onerous terms and oodles of fees so that everybody is happy again!!!!!

Good point, they might be living "rent free" now, would it become section 8 after eminent domain? Government gonna want some rent or else they'll find someone who can pay pass through the federal housing allowance.

The only real solution for the housing crisis is for the Fed to buy up all the MBS and other outstanding primary mortgages and refinance them directly to the people with write downs in principal up to 30%.

A $100,000 mortage, reduced to $70,000 will bring back an entity $135,000 over 30 years at 4% interest. So it doesn't have to cost the government anything. It will cost investors future profits.

I would be ok with cities doing this as well, but cities can't print money so it wouldn't work as effectively. I am not in favor of cities forcing investors to take less than they are due. There are legal processes already established for such.

Cities and states can print money! It's called fractional reserve banking and everyone can do it. What do you think the various for profit banks do every day to make a living? They loan money they don't have. They create credits in peoples accounts that trade as money. Looks a lot like printing to me.

The rule of law is now DEAD in these United States! Once the Union Organizer in Chief declared that bondholders were no longer in a senior position, so that he could give money, including taxpayer funds, to his union cronies at Government Motors, the rule of law has been under assault by the Thief in Chief!

Prepare for tyranny! It's here! And it's called Obama!

Having lived in foreign countries under both military dictatorships and socialist dictatorships, I've seen some of what is coming to American shores. Most Americans have been so complacent about their freedom and prosperity for so long, that they no longer recognize the threats to that freedom. We have no idea how bad things can get! It can get REALLY bad!

There are few places to run or hide. I've lived in even a few countries recommended by Simon Black, and they are NOT safe havens either.

this article isn't about bailing out wall street. it's about government using eminent domain to break contracts and steal private property. if the owner of the property can't pay for it, after legal foreclosure proceedings, they are evicted and it then belongs to whoever the creditor is. period! The mere fact that gov't wants to interfere with this is another example of political overreach to buy votes at the expense of the taxpayer. Pathetic. WTF is happening to the USA?

God damn you newsom! You fuckin asshole! Everything's a fucking travesty with you, man! And what was all that shit about bailouts? What the fuck has anything got to do with bailouts? What the fuck are you talking about?

The dude abides. If hollywood made more movies like this, people would go to the theater.

So lets see. I buy a house at the top of the market, lose my job, cannot make the payments, am underwater big time, but I can continue to live in the house, and get a reduced mortgage, since the city has decided that this is not good for the community. Ummm.

Now, my next door neighbor, who also bought about the same time I did and is also underwater, has not lost his job and his wife got a second job, since they both took pay cuts over the last 3 years, so they could make their mortgage payments on time, since that is the contract they agreed to. And because of the eminent domain clause at some point his and her taxes will increase so I can still be his neighbor and not get evicted.

Exactly. I'm curious as to where the municipalities/states are planning on getting the funny money to purchase mortgages... the state doesn't get to set the price if the person on the receiving end disagrees with the valuation... having participated in a dozen or so of these cases, juries tend to give the owner far more than the state ever offered.

I understand that cities have inherent police, safety, and sanitation powers... these are inherent and SCOTUS will not touch them. However, I'm having a hard time understanding the constitutional justification for the taking... the public purpose. It seems to me that it's nothing more than a private benefit... regardless of how you dress it. Why cities/states want to take another bite at a rotten apple, I'm at a loss... not only shouldn't they, but I don't think they should be allowed to try. I literally see no basis for doing so, outside of blight/dangerous construction. However, if it was simple blight, then they would not need to concoct some scheme to justify doing so.

Macho they have private investors waiting to gobble up the properties from what I have read. They need their taxes and this program in my small mind is against all the laws I ever read. Investors will actually buy up the properties. Eminent Domain is being abused big time for this. This program is not a public program, but a program with private profits. The local government will also get a cut of the proceeds.

I honestly do not know how this is legal. Declaring emminent domain for private profit entities was illegal at one time in this country. Or should I say getting one hell of a deal for the new appraised price or for pennies on the dollar. This whole scheme should be illegal.

I can't fathom anything that would be legal about it from my cursory inspection. The only way it can become legal is to utlize existing methods for eminent domain usage, e.g. blight, public nuisance, health hazard, etc. The problem is that some of the houses are actual homes and are being kept in a mediocre manner, sufficiently above the eminent domain threshold.

Now, this same exact plan is what happens when banks go tits up, so it shouldn't come as any shock... ultimately, political power must be leveraged into pecuniary gain... but, often times, it would at least be a little more covert.

Lienholders aren't going to take too kindly to this approach either. Eminent domain works as long as the organization using its domain powers doesn't actually have to pay market value for the taking. Some might ask how it is possible for the state to not pay fair market value for properties, but it simply boils down to taking things from unassertive people... some of them unwitting (elderly, etc.). If you go to court and challenge the valuation, YOU WILL WIN MONEY. Period. The amount estimated by the state for the value of the taking is but a mere first offer... and typically a laughably low one at that. The simple solution is to clog the courts with challenges of valuation...

Of course, the jury's sympathy might be nonexistent when the homeowner has been long booted out and no longer gives a shit what value is assigned to the house.

Not only that, how many people are aware they signed a Note, NOT a Promissory Note, are aware of the differences between the two document types, and understand that the terms of the note have been satisfied once it is deposited by the broker?